Enterprise resource planning 1st by mary summer chapter 08

Enterprise Resource Planning, 1st
Edition by Mary Sumner
Chapter 8:
Managing an ERP Project

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Objectives
•

Acknowledge the importance of project management and
control

•

Examine the process of organizational change

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Factors Influencing Information
Systems Project Success
•

Number of modifications

•

Effective communications

•

Authority for project implementation

•

Business management

•

Ability to generate additional funds to cover implementation

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Factors Causing Information
Systems Project Failures
•

Poor technical methods

•

Communication failures

•

Poor leadership

•

Initial evaluation of project

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Risk Factors
•

Organizational factors
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–

•

Changes in scope
Sufficiency of resources
Magnitude of potential loss
Departmental conflicts
User experience

Management support
–
–

•

Changing requirements and scope
Lack of commitment

Software design
–
–

Developing wrong functions, wrong user interface
Problems with outsourced components

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Risk Factors, continued
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User involvement
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–
–
–

•

Project management
–
–

•

Lack of commitment
Ineffective communication
Conflicts
Inadequate familiarity with technologies
Size and structure
Control functions

Project escalation
–
–

Societal norms
Continue pouring resources into sinking ships

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Implementation Risks
•

Technology

–
•

Organizational

–
–
•

Customization increases risks
Redesign of business processes to fit package
decreases risk

Human resource factors

–
•

Consistencies with current infrastructure

IT staff skills and expertise

Project size

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Managing Large-Scale Projects
•

MRP or ERP

–

Package implementation differs from custom
implementation
• Vendor participation
• User skills and capabilities
– Management commitment
• Project champion
• Communication with stakeholders
– Training in MRP
– Good project management

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Managing ERP Projects
•

Implementation factors

–
–
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Re-engineering business processes
Changing corporate culture
Project team
• Include business analysts on project team
– Management support
– Commitment to change
•

Risk management

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Factors in Successful ERP

Projects
•

Customization
–
–

•

Increases time and cost
BPR advantage from “best practices” adoptions lost

Use of external consultants
–
–

•

Offer expertise in cross-functional business processes
Problems arise when internal IT department not involved

Supplier relationship management
–

•

Need effective relationships to facilitate and monitor
contracts

Change management

–
–

•

People are resistant to change
Organizational culture fostering open communications

Business measures
–

Create specific metrics at start of project

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Project-Related Factors
•

Project division into subprojects

•

Project leader with proven track record

•

Project focus on user needs instead of technology

•

Project champion

•

Slack time in project schedule

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Additional Factors in the Success
of a Project
•

User training

–
–
•

Management reporting requirements

–
•

Focus on business, not just technical

Critical
May need to add query and reporting tools

Technological challenges

–
–

Data conversion
Interface development

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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FoxMeyer versus Dow Chemical
•

FoxMeyer
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Project went over budget because of new client
Implemented two new systems at same time
Technical issues with the ERP software
No open communications
Unrealistic expectations on ROI

Dow
–
–
–
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Had project implementation problems
Dow had strong leadership and project champion
Was able to adjust scope and maintain control
Fostered open communications

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Featured Article: FoxMeyer’s Project Was
a Disaster. Was the Company Too
Aggressive or Was It Misled?
•

Was FoxMeyer misled?

•

What strategies could have been put into place to avoid the
project disaster?

•

What business misjudgments occurred?

•

Was FoxMeyer’s failure due to technology failure or business
failure?

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
•

Nation’s fourth largest pharmaceutical distributor

–

1990s engaged in enterprise-wide software and
warehouse automation project
– Filed Chapter 11 in 1996
• Claimed to be misled by SAP, Anderson
Consulting, Pinnacle Automation
– Claimed vendors oversold capabilities
– Computer integration problems topped $100 million
– Vendors blame management

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
•

Background
–

FoxMeyer had orders for over 300,000 items per
day, anticipated much growth
•

–
–
–
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Processing hundreds of thousands of transactions each
day

Old system was Unisys mainframe
Wanted scalable client/server system
Tested SAP’s software on both DEC and HP
against benchmarks
Implementations scheduled by Andersen for 18
months
•

Modules to be implemented in 2-3 months
–
–

Unrealistic – could take up to 12 months
All modules fast-tracked

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
–

Two systems for most important business

systems
• SAP supplied the accounting and
manufacturing software
– Claims volume was issue

•

Warehouse system from McHugh Software
International
– Purchased through Pinnacle
» Pinnacle also supplied some hardware

•
•

Added complexities to project
Functional holes in systems

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
•

FoxMeyer strategies

–
–
–
–
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High volume
Low price
Anticipated savings from new computer system
Wanted to win market share by further pricecutting
Hoped new system would be more efficient, but
did not improve processes

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Featured Article: FoxMeyer’s Project Was a
Disaster. Was the Company Too Aggressive or
Was It Misled?, continued
–

FoxMeyer got major new client
• Out of capacity of mainframe
• Issues on balancing system traffic
• Unisys-based management system eventually
failed
• Information wasn’t being received timely
• FoxMeyer suffered losses in transferring

inventory to new centers
• Customers received incorrect shipments
• New customer didn’t deliver expected volume
• FoxMeyer overspent

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Summary
•

A number of factors will effect the success or
failure of a systems project
–
–
–

•

Operational methods and techniques
Business management and style
Leadership and communications

Risk factors effecting projects must be
considered
–
–

Organizational factors, management support,
software design, the levels of user involvement,
and the scope and size of the project itself
Implementation risks for technologies, the
organization, and human resource

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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Summary, continued
•

Success in ERP projects includes factoring in

–

–
–

Consideration of customizations, use of external
consultants, management of supplier
relationships, establishing metrics, and change
management
Project-related concerns
Technological changes, user training, and
management requirements

© Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition

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